The Centre rejected the sugar industry’s demand for an increase in the commodity’s current statutory minimum selling price of ₹31/kg on Friday, citing higher domestic (ex-mill) prices. It also advised the industry to depart from a controlled system.
In response to the industry’s demand, the Union Food Secretary Sudhanshu Pandey at the annual general meeting of the Indian Sugar Mills Association (ISMA) said that ‘There is no need to increase the MSP of sugar at this time because domestic prices are already at ₹34-35 per kg.’
Earlier, in his address, ISMA president Niraj Shirgaokar urged that the MSP for sugar be increased to ₹36-37 per kg to cover the industry’s production costs.
‘For some reason, the government has not finalized the decision to raise the floor price of sugar from ₹31/kg, which was set in February 2019. The government has raised the price of sugarcane twice in 34 months since it was raised to ₹31 per kg. As a result, our production costs have risen significantly during this time,’ Shirgaokar explained.
According to him, at the new sugarcane fair and remunerative price (FRP) of 290 per quintal, the industry’s cost of production of sugar is around ₹36-37 per kg.
Domestic and international markets
Sugar prices (ex-mill) in Muzaffarnagar, Uttar Pradesh, dropped by ₹15-20/quintal to ₹3,460 on Friday, from ₹3,505 on Thursday, according to market participants.
According to the food secretary, Indian sugar is finding a good market price in both the domestic and international markets. Pandey also stated that the MSP system was implemented when prices were falling, but that prices are now steadily increasing.
According to a PTI (Press Trust of India) report, when asked whether the selling price system would be retained or scrapped, Pandey stated, ‘It depends on international market behavior, which country is producing how much, whether we have a surplus or no surplus available.’ It depends; at the moment, we do not require MSP. Why can’t something be based on a need? You use it when it is required. Don’t use it when it’s not required.’
‘The concern is that oil companies are not planning to sign long-term bipartite contractual agreements with existing ethanol producers and sugar mills, and yet they are ranking us lower than the new ethanol plants that the OMCs have shortlisted for long-term supply contracts,’ Shirgaokar said.
ISMA’s other demands
ISMA also maintained its demand for a revenue-sharing formula on sugarcane pricing, which has been raised at every AGM. Experts say it is difficult for any government to withdraw a benefit like FRP for sugarcane farmers in the face of farmers’ demand to legally enforce the minimum support price (MSP) on crops.
Pandey also stated that nearly 3.5 million tonnes (mt) of sugar has already been contracted for exports for the current 2021-22 season. ‘We should reach between 5 and 6 million tonnes (exports) this year,’ he said, adding that India’s sugar production must be balanced to meet global market demand.
Approximately 2 million tonnes of sugar were diverted for ethanol production in 2020-21, with the figure expected to rise to 3.5 million tonnes this year. Pandey believes that by 2025, the goal should be to divert around 6 million tonnes of sugar.